By Gina Heeb
Vernon Hill's Commerce Bancorp was about to open its first New York City branch in 2001 when his wife, Shirley, called wanting to know whether dogs could be allowed inside.
Shirley Hill, also the branch designer, had been stopped from bringing the couple's Yorkshire terrier, Sir Duffield, into other banks.
Vernon Hill, the bank's founder and chief executive, declared it "just another stupid bank rule" and launched a campaign to encourage dogs to visit Commerce.
Hill, now 78 years old, thought a lot of bank rules were stupid. At the three different lenders he ran over the past 50 years, he wanted to upend how consumers bank.
He kept his banks open on Sundays, threw extravagant parties for customers and employees and splurged on prime locations for the bank's branches . He stocked the locations with dog treats and gamelike "Magic Money Machines" where customers could deposit spare change. Commerce became one of the fastest-growing banks in the U.S. in the early aughts, a thorn in some big banks' sides who tried to replicate some of his practices.
But the rules also had a way of catching up to Hill. He was fired from Commerce after regulators complained about conflicts of interest, including paying his wife's design firm millions of dollars for architecture and marketing services. He left Metro Bank in the U.K. when an accounting scandal erupted.
His latest project, Republic First Bancorp in Philadelphia, was seized by regulators last weekend, after shareholders had ousted Hill in a last-ditch effort to save the bank.
Republic First, which did business as Republic Bank across the mid-Atlantic region, was the fourth notable banking collapse since the start of 2023. In the wake of the failures of Silicon Valley Bank, Signature Bank and the similarly named First Republic, Republic First came under pressure for some of the same missteps.
Each tried to grow quickly but found itself overexposed to risks as the Federal Reserve raised interest rates. Fixed-rate securities they bought plummeted in value at the same time customers left to chase higher deposit payouts.
Hill was kicked out by shareholders in 2022, but the new leaders couldn't raise the money needed to fill the balance-sheet holes his strategy left. The bank was deemed insolvent and sold to regional competitor Fulton Financial.
Through a representative, Vernon and Shirley Hill declined to be interviewed for this article.
More influenced by the business models of fast-food chains like Burger King than banks, Hill calls himself "a retailer first and a banker second," according to his 2012 book, "Fans! Not Customers: How to Create Growth Companies in a No Growth World."
The son of a residential real-estate business owner in Virginia, Hill has said he had a modest upbringing. He declined a job offer from a New York bank after he graduated from University of Pennsylvania's Wharton School with a degree in economics in 1967. He instead started a real-estate development company, building sites for McDonald's and other companies.
Even after Hill became a banker, he still didn't consider himself one. He started Commerce in Marlton, N.J., in 1973, doing everything to make sure it looked and operated nothing like the other 14,000 banks in the country at the time.
He built flashy red-and-blue themed branches in prime locations while other banks scaled back. The branches, "stores" as he called them, featured glass walls to represent transparency. He showed up to investor conferences with a red "C" mascot and handed out bank-branded gifts and checking-account applications. And then there was the time he brought Sir Duffield, whom he had declared "chief canine officer," in a bag to an investor dinner at Lehman Brothers.
Commerce grew rapidly over the next three decades, bringing in low-cost deposits through hundreds of branches across the Northeast and parts of Florida. It logged double-digit share-price growth. Hill deployed what he called an "attack model." He openly scoffed at the strategies of other banks, including JPMorgan Chase, HSBC and Toronto-Dominion Bank.
"Bankers always tell me that my policies are ridiculous," Hill wrote in his book. "I think they're the ridiculous ones."
The Hills built a 24,000-square-foot mansion in Moorestown, N.J., designed by Shirley. The Italianate-style mansion, called Villa Collina, has a wine cellar, massage rooms, several reflecting pools and a two-story "lemon room" for growing citrus trees, according to 2015 tax-court records.
Hill also ran other business ventures, including dozens of Burger Kings in Philadelphia and the Galloway National Golf Club outside of Atlantic City.
He hired Shirley's architecture and design firm, InterArch, to plan bank branches. Commerce also leased properties from entities tied to himself and his family.
In the summer of 2007, bank regulators issued cease-and-desist orders against Hill and Commerce, related to the conflict-of-interest allegations. Hill was fired by the board and Commerce was sold to TD Bank for about $7 billion.
In a lawsuit, lawyers for the Hills said regulators had "set upon a course to drive Mr. Hill out of Commerce" based on "unsubstantiated allegations." They said the contracts with InterArch were disclosed.
Looking for a fresh start, Hill tried to bring a Commerce-style bank to the U.K. He opened Metro Bank in London in 2010, backed by the likes of hedge-fund honcho Steve Cohen and dealmaker Ken Moelis.
He opened dozens of branches over the next decade and the bank went public on the London Stock Exchange in 2016. He relished a "challenger bank" status. He made Sir Duffield a mascot and got him business cards. (The Hills have owned three different Sir Duffields over the years.)
In 2019, Metro disclosed errors in the way it classified risk on some of its loans. Hill stepped down after the disclosure, which sent the stock into free fall. U.K. regulators fined the bank and former management, but not Hill.
Metro got approved for a bank license even after U.K. bank regulators held discussions with U.S. bank regulators on the Commerce investigations, people familiar with the matter said. The country was desperate for an option outside of what he called the British bank "cartel," Hill said in his book.
"What happened to Metro has nothing to do with our model," Hill said on a call with analysts in 2021. "It has to do with the banking system in Britain and the European banking system."
Even before he left Metro, Hill had already started on his third try.
In 2008, the year after he was ousted from Commerce, Hill invested in Republic First and made a deal to consult its CEO, Harry Madonna, on how to make Republic First into a newer version of Commerce and Metro.
Republic First was under the watch of Pennsylvania regulators, not the federal regulators Hill had gotten in trouble with at Commerce.
"From a governance standpoint, any bank should have been very cautious," said John Quill, who was deputy comptroller in charge of special supervision at the Office of the Comptroller of the Currency at the time it issued cease-and-desist orders for Commerce.
With the new slogan "The Power of Red is Back!" and Shirley's firm back designing, Hill vowed to settle old scores when he became chairman in 2016 and CEO in 2021. "The object is to take the Commerce Bank market share back from" that bank's new owner, TD, Hill wrote in his book.
Republic First grew fast, just like he wanted, complete with red-and-blue branches reminiscent of Commerce Bank. The bank poured its influx of deposits into fixed-rate securities, especially during the Covid-19 pandemic, when customers were flush with cash. But those investments dropped in value when interest rates rose. Meanwhile, the digital era had made its branch-obsessed culture less effective.
Investors, even some who had worked with Hill at Commerce, weren't happy with the profits and what they thought was an outdated strategy. In 2022, a group led by New Jersey brothers George and Philip Norcross and former TD executive Gregory Braca helped oust Hill. Then they struck a deal to invest $35 million, but it fell apart in March. Regulators seized the bank a few weeks later.
"This place needed an influx of new capital, it needed new talent, it needed modern strategies," Braca said.
Hill may be gone from the executive ranks but his influence remains. TD Bank continues to use the slogan Hill coined at Commerce: "America's Most Convenient Bank."
Write to Gina Heeb at gina.heeb@wsj.com
(END) Dow Jones Newswires
May 03, 2024 21:00 ET (01:00 GMT)
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